Other things equal, under a floating exchange rate system, if American exports decrease and American imports increase, the value of the dollar will likely
A) appreciate.
B) depreciate.
C) be officially revalued.
D) be officially devalued.

Question

Quizplus · Accepted Answer

If American exports decrease and American imports increase, the demand for the dollar will decrease (as there is less demand for dollars to purchase American goods) and the supply of the dollar will increase (as there are more dollars being used to purchase foreign goods). This will lead to a depreciation of the dollar.

Other Things Equal, Under a Floating Exchange Rate System, If